US health care reform limits further pain for pharmaceutical industry

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US health reform in what may be its final form is a mixed bag for pharmaceutical manufacturers and will have differing effects on various sectors of the industry. Gone is the ban on "pay-for-delay" deals between generic and branded manufacturers, gone is any chance of speedy entry by generic biologicals, and added is $19.8bn in new assistance over a decade for the elderly to purchase drugs (Obama healthcare reform puts new focus on 'pay for delay' deals, February 26, 2010).

But whilst an immediate threat to drugmakers’ bottom line was eliminated – the now-disposed ban on legal settlements delaying the entry of generic drugs – it has not been eliminated as a future legislative risk. Congressional budget forecasters have attached five-year government savings of $800m from standalone legislation that would ban the settlements, which lawmakers could turn to in the future if more savings are needed.

Limiting opposition

The House vote on the legislation, scheduled for Sunday, is expected to be tight, and legislative leaders undoubtedly needed to put lobbying forces on the sideline. Given that both branded and generic manufacturers benefit from patent settlements – branded manufacturers get to delay generic entry and the price erosion that comes with it, while first-to-file generic manufacturers often get paid or receive other material benefit while still maintaining their 180-day exclusivity – the pay-for-delay ban advocated by President Barack Obama was likely to add additional voices to the already-deafening anti-reform chorus.

As it is, the leading pharmaceutical lobbying groups are either publicly silent on the legislation or largely plauditory. The Generic Pharmaceutical Association (GPhA), for example, praised lawmakers for rejecting the patent settlement ban, whilst the Pharmaceutical Research and Manufacturers of America (PhRMA) made no public statement on the bill, even with the favourable decision on patent settlement bans.

PhRMA is in the slightly awkward position of having supported health reform with a promise of $80bn in discounts to senior citizens in the Medicare program, so its past public declarations have been largely supportive of reform. To loudly voice opposition would be a surprising about-face, even if there have been grumblings among members about the organisation’s support.

Generics vs biotech

Likewise among pharma lobbying groups, the Biotechnology Industry Organisation (BIO) also has made no public statement regarding the package about to move through the House. An association spokeswoman said BIO remains supportive of the pathway for follow-on biologicals as it stands, however.

Not surprisingly, that provision was the only one the generic manufacturers were critical of. The package provides for a 12-year period during which competitors cannot rely on a first-to-market biotech company’s safety and efficacy data in the regulatory process. Generics supported a five-year data exclusivity period.

In a sign that the battle is largely over, the GPhA said in a public statement that it "will be back to encourage Congress to do everything it can to better contain costs by ensuring more timely access to generic and biogeneric medicines."

Senior assistance

The package adds $19.8bn – making a total of $37.6bn over 10 years – to assist seniors who have reached a gap in Medicare coverage to purchase drugs. The proposal will reduce seniors’ costs to just 25% for both branded and generic drugs by 2020, something that will surely increase sales volumes. This assistance will be in addition to the 50% discounts promised by PhRMA members.

Legislative leaders appear to have largely defused potential outside opposition from the pharmaceutical industry, which will make the job of rounding up the votes easier. The rest will likely be down to politics – approaching elections and well-organised grassroots campaigns in favour and opposed to reform legislation are playing a big role in its fate. As such, the industry is staying well out of the way of the final blows of the long-running battle.

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